Mortgage Insurance Overpricing: Key Insights from PolicyMe's CEO
Homeowners in Canada opting for mortgage insurance through their banks may be overspending, according to Andrew Ostro, CEO and co-founder of PolicyMe, a digital insurer based in Toronto. Ostro points out that lender-provided mortgage life insurance (MLI) often costs more than term life insurance, suggesting that mortgage brokers can help clients unlock potential savings before finalizing loans.
Ostro underscores the need for life insurance that extends beyond just mortgage coverage. He notes that while mortgage life insurance primarily benefits the lender, term life insurance grants families flexibility in utilizing benefits. This flexibility is particularly critical following the death of a primary earning family member.
Mortgage life insurance payouts directly lower the mortgage balance, providing limited financial options to the family. Ostro explains: "Maybe the family says, 'I'd rather take that $500,000, continue to pay off my mortgage $2,000 a month and start a business or buy my kids clothing, put food on the table.'"
Key Advantages of Term Life Insurance
A major advantage of term life insurance is its consistent benefit amount, independent of the mortgage balance. This stands in contrast to mortgage life insurance, where premiums do not decrease with reducing loan amounts. Term life insurance also offers portability, generally allowing policyholders to secure lower rates over longer periods, like 10 to 20 years, compared to lender-attached policies typically tied to five-year mortgage terms.
PolicyMe's data from 2025 indicates that while the average outstanding mortgage was $451,681, their clients sought average coverage of $692,335. This reflects a broader perspective on financial security, suggesting that families view mortgage amounts as just the starting point for their insurance needs.
The convenience of lender-provided insurance, which comes with fewer health-related inquiries, adds to its appeal. However, Ostro warns this simplicity could lead to higher costs over time. Applying for term life insurance involves more comprehensive health assessments, potentially resulting in lower premiums for healthy applicants. While lender-attached MLI may suit those with significant health challenges, term life insurance often presents a more cost-effective and flexible solution for most families.
A 2025 report by PolicyMe, in collaboration with Angus Reid, revealed that 65% of uninsured Canadians were not considering life insurance within the next five years. Moreover, one in four voiced concerns about their family's financial stability in the event of an unexpected death. Ostro suggests that while lender coverage is preferable to having none, most healthy mortgage holders should consider a term life policy for greater flexibility and reduced costs. "My takeaway would be, if you're going to get nothing, take the mortgage insurance over nothing," Ostro asserted. "But what you should be doing is buying a proper term life insurance policy."